Optimism the word in wool sector

There is room for long-term optimism for the New Zealand wool industry, despite softening prices, PGG Wrightson Wool general manager Cedric Bayly says.

The commodity cycle was on a long-term growth path, driven by large-scale demand from economies such as Asia, the United Kingdom and Europe.

Wool prices had been no exception, although the increases had been "mercurial" in light of short global supply of coarse wool, with New Zealand prices virtually doubling in just over a year, helped by a decline in sheep numbers.

While that was good news for growers, current price levels were under pressure as large volumes of New Zealand wool come on to the market during January to March.

"While we welcome price improvement it does not reflect any structural long-term change to the industry, rather the trend of commodity markets to bounce.

"We are already seeing evidence of softening prices across most classes of product as exporters come under price pressure, exacerbated by the strength of the New Zealand dollar and the failure of economies overseas that we sell into," Mr Bayly said.

He believed that was likely to result in manufacturers changing their buying patterns.

"Manufacturers are purchasing on shorter payment terms and are ordering only when wool is needed rather than also buying for stock.

"Wool carpets are repositioning to the top half of the market and leaving the bottom to chemical-base fibres. This has been driven by raw wool fibre prices.

"This equates to a good news, bad news scenario. Wool growers benefit while on the other side of the equation yarn spinners, who don't operate on very big margins, are finding it difficult to absorb significant price rises over a short period," he said.

Yet he believed there was room for long-term optimism, saying any market was supply and demand and the reality was that coarse wool was in shorter supply around the world.

There was also increased demand, in Asia especially, with the increasing affluence and heightened consumer demand for quality wool carpets.

Wools of New Zealand has been attending Domotex, the world's largest flooring show, in Germany this month, with partner companies invited to exhibit within the Wools of New Zealand Wool Centre.

In a tough global textiles market, companies were increasingly looking to align with quality brands to add value to their products and were showing increasing interest in the Wools of New Zealand and Laneve brands.

There were 93 new Laneve products displayed at Domotex and hundreds of Wools of New Zealand branded carpets and rugs.

"We now have real traction in the European market and a number of manufacturers and retail chains wanting to be part of our brand programmes.

"Yarn spinners and carpet manufacturers are looking for long-term contracts with growers to secure the best wool and to have stable prices," Wools of New Zealand's market manager for Europe and North America, David Hammond, said.

New marketing agreements were negotiated at the show and Wools of New Zealand had been invited to contribute regular features about the benefits of wool to major trade publications which reached retailers and manufacturers across Europe.

It planned to further strengthen wools' presence at Domotex through closer collaboration with other like-minded wool organisations, director Mark Shadbolt said.